Key Takeaways ARES reported record $46B 4Q25 investment and a record-high January 2026 pipeline.Ares Management is expanding its digital infrastructure, launching a $2.4B data center fund.ARES reaffirmed 16-20% FRE growth, more than 20% RI growth and raised its Q1 dividend 20%.At the 34th Annual Financial Services Conference hosted by Bank of America, Michael Arougheti, co-founder and CEO of Ares Management Corporation (ARES) , delivered an optimistic outlook on the firm’s prospects for 2026. Management ind ...

On recent headlines around AI disruption, Arougheti said private market investors try not to get “whipsawed” by daily headlines and argued it is “quite odd” that public markets have “woken up” to AI disruption as a theme. He emphasized that AI can create opportunities as well as risks, noting that while some companies may be disrupted, others may see improved productivity and margin expansion.He also said that, as of the end of January, Ares’ pipeline tracked across all businesses was at a record high, whic ...

Core Viewpoint - Ares Management Corp is positioned as a strong long-term investment opportunity, with significant growth potential highlighted by its recent performance and strategic initiatives [1][4]. Financial Performance - For Q4 2025, Ares Management reported an EPS of $1.45 and revenue of $1.5 billion, which were below analyst expectations of $1.70 EPS and $1.52 billion in revenue [3]. - The company achieved a 27% year-over-year increase in management fees and surpassed $100 billion in fundraising for the year, raising its assets under management to over $600 billion [3]. Growth Strategy - CEO Michael Arougheti outlined growth priorities including expansion in private credit, digital infrastructure, and real estate, with a focus on AI integration to enhance efficiency [2]. - The company has set ambitious targets of 16%–20% annual growth in fee-related earnings (FRE) and over 20% growth in revenue [2]. Market Position and Outlook - Ares Management has $150 billion in dry powder and a strong deal pipeline, indicating confidence in capitalizing on favorable market conditions [2]. - Raymond James upgraded ARES stock to a Strong Buy with a price target of $157, citing a robust outlook for fee-related earnings growth through 2028 [4]. Dividend and Investment Case - Ares Management offers a 4.1% common dividend yield, which supports the investment case for ARES stock, especially considering that over $100 billion of its assets under management are not yet earning fees [5]. Company Overview - Ares Management Corp is a global alternative investment manager with nearly $623 billion in assets under management, operating across private equity, credit, and real estate markets [6].

Core Insights - The private credit industry's actual loan exposure to the software sector may significantly exceed disclosed levels, with at least 250 investments worth over $9 billion not classified as software loans despite being defined as such by other lenders or sponsors [1][2] - The software sector has become the largest single industry exposure for Business Development Companies (BDCs), accounting for approximately 20% of all loans held by BDCs, compared to 13% in the broader leveraged loan market [2][6] - The classification inconsistencies among BDCs complicate the assessment of risk exposure, especially as AI technologies threaten traditional software business models [1][7] Group 1: Classification Issues - A review of disclosures from major BDCs revealed that software companies are often categorized under different industry classifications, leading to a lack of clarity regarding their actual exposure [3][4] - For instance, companies like Pricefx and Kaseya, which identify as software firms, have been classified as "business services" and "professional retail" respectively by their lenders, highlighting the discrepancies in classification standards [3][4] - This inconsistency extends even within the same company, as seen with Blue Owl Capital, where the same firms are classified differently across various funds [5] Group 2: Market Risks and Concerns - The influx of private equity funds into the software sector has been significant, with approximately 30% of private equity capital flowing into this industry over the past decade, and software accounting for 40% of all sponsor-backed private credit [6] - Recent advancements in AI technology have raised concerns about the future of software businesses, with the S&P North American Software Index dropping over 20% this year, indicating heightened market anxiety [7][10] - Analysts warn that the ongoing AI revolution is fundamentally altering the software industry, rendering historical classification guidelines obsolete and increasing scrutiny on private credit managers [10]

Core Viewpoint - Private equity firms are striving to convince investors that their portfolios are resilient against the recent sell-off in the software sector, driven by concerns over artificial intelligence undermining competitiveness in the industry [1] Group 1: Company Performance and Portfolio Exposure - Ares reported that approximately 6% of its overall assets are invested in software companies, with a diversified portfolio minimizing exposure to AI-related risks [2] - Apollo Global Management has less than 2% exposure to the software industry, with its private equity business having nearly zero exposure [2] - KKR has about 7% of its portfolio in the software sector, while Blue Owl has 8%, both experiencing significant stock price declines of 29% and over 36% respectively in the past six months [3][6] Group 2: Market Reactions and Investor Sentiment - Despite strong financial performance, private equity firms have seen stock sell-offs, with one firm experiencing a nearly 6% drop this week and an 11% decline over the past six months [3] - Concerns about excessive investments in AI by alternative asset management firms have led to fears of potential losses if AI fails [6][7] - Analysts suggest that the narrative around alternative asset management firms suffering losses due to AI's transformative impact may be flawed, indicating a potential misjudgment in market sentiment [7]

Group 1 - High Yield Investor has invested over $100,000 annually and thousands of hours to identify profitable investment opportunities, resulting in over 200 five-star reviews from members [1] - The company is celebrating its fifth anniversary by offering new members a 30-day money-back guarantee, encouraging potential investors to join [1] - High Yield Investor has released its Top Picks for 2026, presenting a timely opportunity for new members to engage with the service [1] Group 2 - Samuel Smith, the lead analyst of High Yield Investor, has a diverse background in dividend stock research and holds advanced degrees in engineering and applied mathematics [2] - The investment group focuses on balancing safety, growth, yield, and value, offering various portfolio options including core, retirement, and international portfolios [2] - High Yield Investor provides regular trade alerts, educational content, and an active chat room for investors to engage with like-minded individuals [2]

Core Insights - The presentation is part of Bank of America's 34th Annual Financial Services Conference, highlighting the importance of financial services in the current market landscape [1] Company Overview - Michael Arougheti is introduced as the Co-Founder, CEO, and Director of Ares Management, indicating his significant role in the company [1]

Ares Management Conference Call Summary Company Overview - Ares Management (NYSE: ARES) is one of the largest alternative asset managers globally, with a significant presence in non-investment grade private credit. The firm's assets under management (AUM) have increased from approximately $200 billion five years ago to $600 billion currently, marking a threefold growth [3][4]. Macro Environment and Industry Outlook - The macroeconomic backdrop for 2026 is viewed positively, with expectations for increased IPOs and M&A activity. The Federal Reserve's rate cuts and a pro-business administration are seen as supportive factors for the deal environment [4][5]. - Ares Management reported a record fourth quarter in 2025, deploying about $46 billion in capital, with a record-high pipeline as of January 2026, indicating strong transaction volumes anticipated in the first half of the year [5][6]. - The firm is optimistic about the impact of AI on investment opportunities, emphasizing that while some companies may face disruption, others will benefit from improved margins and productivity [10][11]. Strategic Priorities - Ares Management's strategic priorities for the year include: 1. Expansion in digital infrastructure, particularly in Japan, where the firm aims to diversify its product offerings [15][18]. 2. Continued development of a vertically integrated real estate approach, focusing on owning and managing real estate assets [19][20]. 3. Capturing margin opportunities across the business through technology investments and organizational redesign [20]. 4. While private equity is not a top priority, the firm remains open to expanding its capabilities in this area to meet client demand and enhance value creation [21][22]. Financial Guidance - Ares Management has reaffirmed its growth targets, aiming for a 16%-20% annual growth in fee-related earnings (FRE) and over 20% growth in revenue income (RI) [27][28]. The firm also announced a 20% increase in its dividend, reflecting confidence in its financial outlook [28]. Private Credit Insights - Ares Management is recognized as a leading non-investment grade private credit lender, with a strong performance track record attributed to its origination-led strategy and deep industry expertise [32][37]. - The firm maintains a selective investment approach, approving only 3%-5% of transactions, which contributes to its high asset selectivity and performance [32][35]. - The private credit market is characterized by a concentration of capital among top managers, with Ares Management positioned favorably due to its scale and incumbency advantages [53][54]. Market Dynamics and Competition - The relationship between banks and private credit managers is described as symbiotic rather than competitive. Ares Management benefits from banks' de-risking strategies, which create opportunities for private credit to fill the gap in the market [48][50]. - Despite some negative narratives surrounding private credit, Ares Management reports positive net flows and a strong appetite for private credit among institutional clients [43][44]. Wealth Management Strategy - Ares Management has strategically built its wealth management channel, focusing on ensuring a right-to-win in the market. The firm has achieved a top 3 distributor position in the wealth channel and aims to deepen relationships with existing distribution partners [60][62]. - The firm is cautious about adding new products, preferring to scale existing offerings and ensure they align with the overall business strategy [64][65]. AI Implementation - Ares Management has integrated AI capabilities into its operations, focusing on enhancing productivity and investment outcomes. The firm is actively deploying AI tools across various functions, including investment analysis and sales optimization [68][70]. - The early results from AI initiatives have shown promise, contributing to a slowdown in organic headcount growth while maintaining productivity levels [71]. Conclusion - Ares Management is well-positioned for growth in 2026, with a strong focus on strategic priorities, financial performance, and leveraging technology to enhance its operations and investment capabilities. The firm remains optimistic about the macroeconomic environment and the opportunities presented by AI and digital infrastructure.

Group 1 - Ares Management is providing $2.4 billion in debt financing to Vantage Data Centers, with part of the funds potentially supporting infrastructure for Oracle's collaboration with OpenAI [1] - Ares has agreed to a financing commitment of $1.6 billion to Vantage and has already allocated approximately $330 million for the project [1] - The funds will be used for the development, construction, and operation of data centers within Vantage's North American portfolio, as well as refinancing existing debt [1] Group 2 - Vantage's portfolio includes 17 campuses primarily supporting cloud computing and artificial intelligence technologies, with assets leased to major cloud service providers [2] - Vantage is backed by DigitalBridge Group Inc., which agreed to be acquired by SoftBank Group for approximately $3 billion at the end of last year [2] - The portfolio also includes several digital infrastructure operators, including Aims Group, AtlasEdge, DataBank, Switch, and Yondr Group [2]

Group 1 - Ares Management Corporation (NYSE:ARES) is recognized as one of the top 10 financial stocks for long-term investment, with a significant upside potential indicated by recent price target adjustments from analysts [1] - Morgan Stanley raised its price target for Ares Management from $175 to $178, suggesting a 42.4% upside from current levels, which aligns with the median upside of 41.38% from 19 analysts covering the stock [1] - Oppenheimer also increased its price target for Ares Management from $190 to $224 while maintaining a Buy rating, reflecting a broader review of price targets in the alternative asset management sector [3] Group 2 - The company is experiencing increased deal activity, which is expected to support alternative asset managers through the fourth quarter and into 2026, leading to an upward revision of earnings per share estimates by Morgan Stanley [2] - The adjusted earnings per share estimates have been increased by 4%, now standing 1% above the consensus among analysts, indicating rising confidence in the company's short-term performance [2] - Ares Management operates in various segments including Direct Lending, Private Equity, and Real Estate, and has a global presence in the United States, Asia, and Europe [4]